Classification of Indian cities

Classification of Indian cities

Subject – Polity

Context – There is a lot of potential to be tapped for start-ups in Tier-II and & Tier -III cities, according to the Minister for Commerce & Industry Piyush Goya

Concept –

• The classification of Indian cities is a ranking system used by the Government of India to allocate House Rent Allowance (HRA) to public servants employed in cities in India.
• HRA is also used by the Indian Revenue Service (IRS) to provide income tax exemptions. Cities are classified on the basis of their population, as recommended by the Sixth Central Pay Finance.
• Under the latest HRA city ranking scheme, most popular media and culture considers only tier-X cities to be metropolitan in nature. These eight cities are considered India’s “metros”.

Current classification

• Under the recommendation of the Seventh Central Pay Commission, the CCA classification was abolished in 2008. The earlier HRA classification of cities was changed from A-1 to X; A, B-1, and B-2 to Y; and C and unclassified cities to Z.
• X, Y, and Z are more commonly known as Tier-1, Tier-2, and Tier-3 cities, respectively.
  • There are eight X cities and ninety seven Y cities.
• On the basis of the 2011 census, two cities—Pune and Ahmedabad—were upgraded from Y to X and twenty one cities from Z to Y on 1 April 2014.

Tier-1 cities: Pune, Mumbai, Ahmedabad, Bengaluru, Chennai, Delhi, Kolkata, Hyderabad.

Population-based classification

The Reserve Bank of India (RBI) classifies centres into six tiers based on population.